Weapons of Mass Destruction (WMD)

House Votes Could Be Costly
To U.S. Aerospace Concerns

By BRIAN DUFFY and THOMAS E. RICKS
Staff Reporters of THE WALL STREET JOURNAL

WASHINGTON -- America's race to space just got a warning flag.

Four surprise House votes to sharply limit satellite and high-technology exports to China could cost U.S. aerospace companies hundreds of millions of dollars and open a window for foreign corporations to jump ahead in the competition to provide global-communications services.

"We're talking about the potential loss of major contracts," said William Reinsch, undersecretary of commerce. "It could really complicate peoples' lives."

Three lopsided votes on amendments to the $270 billion defense-authorization bill came amid GOP charges that the Clinton administration jeopardized national security by approving the export of U.S.-made satellites for launch on Chinese missiles. A fourth measure, a resolution expressing the "sense of Congress," passed 417-4. Technology exports to China, it said, were "not in the national interest."

Strong Signal

The bill still has to be approved by the Senate, where the amendments could be stripped out. But the votes are nonetheless a powerful signal of the political currents in Washington.

The votes represent an obvious outgrowth of the controversy swirling around President Clinton's ties to Asian fundraisers, and questions about whether those Asians won special favors. But the congressional action also signals something broader: a collision between the government's desire to curb the proliferation of weapons technology and the aerospace industry's intensifying pursuit of new business in space. The companies say they need increased leeway to use foreign governments and businesses to loft their communications satellites.

That pursuit has caused increasing friction among U.S. government regulators charged with ensuring that sensitive American-made technology that can be used for military purposes doesn't fall into the wrong hands. With billions at stake in new satellite business, executives of aerospace companies have ponied up hundreds of thousands of dollars in political contributions. Republican leaders have charged that the Clinton administration has been unduly swayed by the money.

Inquiries Are Planned

House Speaker Newt Gingrich of Georgia, who ordered a special committee to investigate the satellite-export matter, said the inquiry also would focus on allegations that a Chinese military officer affiliated with a Beijing satellite company contributed thousands of dollars to the Democratic Party. Senate Majority Leader Trent Lott of Mississippi announced Wednesday that he was creating a "task force" to conduct a parallel inquiry.

Mr. Clinton, who plans to travel to Beijing next month for a scheduled state visit, has pledged to cooperate with the congressional investigations. But White House counsel Charles Ruff wrote to both Rep. Gingrich and Sen. Lott reassuring them that "the national security of the U.S. has in no way been compromised or endangered ... ."

For the export restrictions to become law, the Senate would have to approve them in identical form when it takes up the defense bill, sometime in June. Failure to do so would require a vote by a House-Senate conference. White House spokesman Joe Lockhart said Mr. Clinton "is a long way" from having to veto the legislation.

The House action created consternation among some aerospace executives. Satellite makers have been scrambling to find rockets that can carry their equipment into orbit. Providers of mobile and video telephone services, direct-to-home television and data feeds, paging and messaging and other services have been clamoring for room on new satellites.

Vying for Space

But there has been a dearth of launch capability in recent years, and U.S. government projections are that satellite makers' demands will outstrip commercial launches for the next 10 years. Last year, Chinese, French, U.S. and Russian rockets sent 35 commercial satellites aloft. But as many as 350 satellites could be vying for space on launch vehicles in the next few years.

The Commerce Department estimates the world market for commercial satellites at $51 billion a year. In the U.S., the industry accounted for 60,000 jobs and more than $8 billion in revenue last year.

The controversy currently besetting Mr. Clinton had its origins in the administration of President Bush. After the Tiananmen Square massacre in 1989, the U.S. imposed sanctions on Beijing, one of whose provisions required a presidential waiver for export of U.S. satellites to China. That requirement covered satellites purchased by non-Chinese clients that were merely launched on Chinese rockets.

After the demise of the U.S. commercial space-launch industry in the mid-1980s, the Chinese became increasingly active in launching commercial satellites for foreign clients, including U.S. satellite makers. Mr. Bush approved three waivers for such exports, allowing the launch of nine satellites. Mr. Clinton has approved 10 waivers allowing the launch of 11 U.S. satellites.

Waiver Situation

Because of the potential that commercial satellites could be used by foreign militaries, regulations required the State Department and other national-security agencies to vet applications for waivers. During the administrations of Messrs. Bush and Clinton, U.S. satellite makers lobbied hard for an increase in the quota of Chinese launches allowed in a Beijing-Washington accord. They also sought a less-stringent government vetting process on waiver requests, one in which the Commerce Department played a role.

The State Department opposed that. But in March 1996, President Clinton issued an order letting the Commerce Department review waiver applications to export some U.S. satellites. That decision will be a major focus of the congressional inquiries ordered this week by Messrs. Gingrich and Lott.

Another focus will be the waivers themselves. John Pike, director of space policy at the Federation of American Scientists, a Washington arms-control advocacy group, says the amount of U.S. technology improperly transferred to China as a result of the presidential waivers "has been between slim to nil." He adds that it would be foolish "to let that very small military significance outweigh the commercial benefit of making America the dominant player in the global-satellite business."

But the man who until last year was director of the Central Intelligence Agency's nonproliferation office disagrees. "Does he know what was transferred? I don't," says Gordon Oehler, who left the agency in October. Until it becomes clear what the Chinese learned about missile guidance and control systems, he says, it is impossible to make judgments about the costs and benefits of the Clinton administration's policy of permitting the U.S. aerospace industry to work extensively with the Chinese.

Proliferation experts at the Pentagon and elsewhere in the government say they, too, were unaware of the waivers when they occurred, a situation they find strange.

Joel Johnson, vice president for international affairs for the Aerospace Industries Association, said the congressional concerns about the Clinton administration's actions on export policy are overblown. "I think some people are going to look foolish when this is all over," he says. But in the end, he adds, "I think sanity will prevail."

--Jeanne Cummings contributed to this article.